CoinMarketCap takes a look at what two popular Layer 1 blockchains bring to the table — Solana and Binance Smart Chain — and how they differ.
The Layer 1 landscape in blockchains has undergone consistent evolution since the start of DeFi summer in 2020. Many L1 blockchains have emerged, promising increased transaction throughput, improved security and a resilient overall architecture.
While each solution has its own benefits and tradeoffs, most of them have slowly seen the growth of various communities around them. Notable amongst these is Solana (SOL) and Binance Smart Chain, both of which have attempted to solve the problem of increased transaction throughput.
Whilst the DApp ecosystem is huge on Ethereum (ETH), the ones on these L1 solutions are also increasing, albeit at a slower pace. In this article, we will understand what these blockchains accomplish, how they are different to Ethereum and each other, and look at how each network attempt to solve the blockchain trilemma — decentralization, security and scalability.
What Does Binance Smart Chain Aim to Solve?
Binance Smart Chain (BSC) was introduced in September 2020, when the battle for high transaction throughput blockchain was about to peak.
Just over a year ago, Binance had also released their first independent blockchain known as the Binance Chain. However, it was not as successful because it did not support smart contracts and wasn't EVM-compatible (Ethereum Virtual Machine).
BSC, on the other hand, solved these problems. This meant that developers could very well port over their dApps from Ethereum to Binance. BSC is also not connected to the Binance Chain, making it resilient to any attacks or compromises to the latter.
Benefits of Binance Smart Chain
The prime objective of BSC was to massively increase transaction throughput and rapidly reduce transactional cost. Here's some of its main features:
- Consensus Mechanism: It did manage to achieve both the goals by adopting a Proof of Authority (PoA) and Delegated Proof of Stake (DPoS) consensus mechanism. But how did it manage to reduce transactional cost? By reducing the number of validators.
- Validators: There can only ever be a total of 21 validators on BSC. Active validators are determined according to the amount of BNB they stake, and this process refreshes every 24 hours. This is also where the problem lies. Anyone with a considerably high stake of BNB can become a validator on the network and continue to occupy the position. This is the reason BSC has met with criticism.
- Cross-Chain Bridging: This facilitates creating a bridge using Binance Bridge, enabling users to bring their USDT, BUSD and ETH to BSC, thus providing for a smooth inter-blockchain experience.
DApp Ecosystem on Binance Smart Chain
While the transaction costs on BSC are extremely low as compared to Ethereum (even during network congestion), many consider it more of a centralized protocol. This could be the reason why its DApp ecosystem is significantly smaller when compared to the ecosystem on Ethereum.
Number of dApps Listed on Various Protocols, Source
PancakeSwap is the most popular dApp (it is a decentralized exchange) on the protocol, and its performance is almost commensurate with that of other decentralized exchanges (DEXs).
Pancakeswap vs Other Popular DEXs, Source
When the network congestion on Ethereum was too high, several users and developers jumped on Binance, which led to a rapid increase in the number of transactions on the blockchain. However, the past few months saw a consistent decline in the number of daily transactions.
What Does Solana Aim to Solve?
Solana is another popular Layer 1 blockchain solution that relies on an entirely different consensus mechanism known as Proof of History (PoH).
In PoH, a series of computational steps are relied upon to validate the time difference between two events. This is done cryptographically by adding a delay function to SHA 256. The protocol relies on placing transactions in a timely order, which is the not case with other blockchains like Ethereum.
If you want to learn more about PoH, you can do so here.
Benefits of Solana Blockchain
One of the key features of Solana is that it processes 65,000 transactions per second (which is as many transactions as Visa can process) and has the capability to process about 100,000 transactions per second. This is made possibly because it has what is known as a stateless architecture.
The difference between a stateless and a stateful architecture is that in the former programs are not required to remember the state of the blockchain. In the latter, however, they are required to remember each state, and transactions don't process until all programs have their states updated.
This is fancy technical lingo for: a stateless architecture utilizes less memory and hence provides much faster transaction throughput. A stateful architecture utilizes more memory, and hence the transaction throughput gets affected.
Here are some more features of Solana:
- It currently has over 1000 validators in the network, up from 500 validators just over a few months ago.
- At the moment, over 75% of the $SOL token is staked, which means that the network is currently extremely resilient to any attacks.
As you can tell, the fact that Solana is able to process an incredibly high number of transactions per second makes it one of the most capable L1 blockchains. Solana currently has over $10B in TVL (total value locked) amongst all its DeFi applications. While this number dipped for a bit when it experienced downtime, it has managed to rebound since then.
TVL on Solana, Source
The increased throughput has helped the overall DeFi ecosystem grow over the past few months. The protocol, too, has been indulging in aggressive market campaigns (like hackathons and bug bounty programs) which have enabled a large influx of both developers and users to the protocol. However, the number of DApps in Solana's DeFi ecosystem still trail behind Binance Smart Chain's.
Number of dApps on Solana, Source
The Bottom Line
While every L1 has its own benefits and tradeoffs, the competition amongst various blockchains has been increasing tremendously. While Ethereum maximalists preach that it is hard to defeat a protocol that is fully decentralized and resilient, proponents of networks like Solana and Binance Smart Chain are confident that it will continue to foster a growing community of users.
All that being said, we are yet to see who wins the battle of L1 in the long run. What we do know, with a significantly greater degree of certainty, is who the ultimate winner will be — the users.
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